On 30th October 2024, the new Chancellor of the Exchequer Rachel Reeves announced the Autumn Budget.
Amongst the measures announced in the Budget were an increase in Employer’s National Insurance, a moderate increase in Capital Gains, a freeze on fuel duty, a rising minimum wage and a stamp duty increase.
But how do measures in the 2024 budget impact contractors?
In this guide, Umbrella Search outlines everything contractors need to know about the Autumn Budget and what this will mean for them.
Key takeaways from the Autumn Budget
Let’s start by taking a look at the main points announced in the Budget.
A number of measures were announced by the Chancellor aiming to raise £40bn in total.
A rise in Capital Gains Tax will be introduced, increasing from 10% to 18%, and the higher rate will rise from 20% to 24%.
Employer’s National Insurance will rise from 13.8% to 15% on salaries above £5000.
The Minimum wage will rise from April 2025, for employees aged 21 or over it will rise from £11.44 to £12.21, and for 18-20 year olds it will rise from £8.60 to £10.
Rates of income tax and National Insurance for employees, however, will remain unchanged.
Fuel duty will remain frozen, with no increases until 2026 at the earliest. Inheritance tax thresholds will also be frozen at £325,000 until 2030.
So, what does this mean for contractors?
Impact of the Budget on Contractors
Contractors should look at some of the measures that weren't mentioned or weren't changed, as this can have an impact on them. Contractors should note that there was no mention of IR35, meaning no changes will be made to the legislation.
It was also announced that there would be no changes to the dividend tax. This means that contractors who pay themselves a small salary, which is topped up with dividends, can rest assured that they won't be paying higher rates of tax on these payments in the coming years.
What's more, Corporation Tax will also remain unchanged. Again, this means that contractors who work through a limited company won't face tax hikes on profits.
Other forms of tax, such as Income Tax and VAT, were also kept at current levels, meaning contractors won't face tax hikes, which is good news for everyone.
Employer’s National Insurance increase
As we have mentioned, Employer’s National Insurance will increase to 15%, an increase of 1.2%.
For contractors that work through an umbrella company, this means that they may feel this directly in their gross pay. This will impact contractors who work through an umbrella company that deducts these employer costs from the contractor's salary.
This would mean that the contractor will be left with less income than they had previously. To combat this, the contractor may increase their rate.
However, it was also announced that the Employment Allowance will be increased from £5000 to £10,500. This will help to protect the UK’s smallest companies.
As the National Insurance rate increase will mean greater costs for employers, however, this may have a positive knock on impact for contractors, as such employers may have a greater demand for contractors rather than employees in the future. This is due to the flexible nature of contracting with no ongoing commitment to salary and no employer national insurance due for these workers from the employer, so contractors may see an uplift in work and a more competitive market.
Umbrella Regulation Measures
The autumn budget introduces new regulations that will affect contractors, specifically regarding umbrella companies.
One key change is the shifting of PAYE (Pay As You Earn) responsibility. Starting in April 2026, this responsibility will move from umbrella companies to recruitment agencies or end clients, if no agency is involved.
While umbrella companies will still be able to process PAYE, the end client or agency will be held liable if they fail to comply with these regulations. This measure aims to ensure that the correct amount of PAYE is paid and to eliminate any non-compliant umbrella companies from the market.
Key takeaways from the Budget for contractors
There may be a slight decrease in salary for umbrella company contractors who may end up absorbing the cost of increases in Employer’s National Insurance which is a cost sometimes passed on by the umbrella company to the contractor.
However, if this is the case, contractors can consider increasing their daily rate or paying more into their pensions to reduce this liability.
Generally, however the Budget was good for contractors. With no increases in income tax, employee’s National Insurance, Dividend tax and Corporation Tax, contractors won’t face tax rises.
What's more, actions will be taken against any umbrella companies that aren’t compliant, which is good news for the industry.
However, with no mention of IR35, this remains a continuous issue for limited company contractors, many of whom struggle against this legislation that can make self-employed contractors' lives more difficult. You can read more about IR35 and how it impacts contractors in this guide.
For this reason, you may be considering using the services of an umbrella company.
If that's the case, Umbrella Search is here to help.
Umbrella Search is here to help
Using the services of an umbrella company means that contractors don’t need to worry about IR35, and will also receive a plethora of benefits from their chosen provider, such as help with admin and paperwork, having their tax worked out, help with finances, insurance and benefiting from employee benefits.
If you’re looking to take the next steps to contracting through an umbrella company, Umbrella Search can help. We will work with contractors to understand what’s important to you. Whether you need same day payments, or you need specific levels of insurance, we’ll find an umbrella company that’s just right for you.
To see how we can help, simply get in touch with the Umbrella Search team today and take the next step to finding the best umbrella company out there.
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